Evidence in experimental and behavioral economics suggests the following:
- people have a preference for honesty (or against guilt or lying)
- see Gneezy (2005), Gneezy et al (2013), Dreber & Johannssen (2010), Kartik (2009), and many others
- people have a utility function with standard properties
- they have social preferences because they dislike lying
- lying imposes a utility cost
- extensive margin: cost to lying at all
- intensive margin: cost in size of lie